'Credit is a basic human right'

To western eyes Bangladesh remains mired in poverty. On the streets of Dhaka, the capital, SUVs plough through a sea of beggars. Cycle rickshaws propelled by bare-chested men clog the roads.

But despite appearances, this is the site of good news. Says Muhammad Yunus, the founder and CEO of the Grameen bank, which lends $1bn to 7 million poor people. Almost all are women from Bangladesh's 78,000 villages. The bottom line, says Prof Yunus, winner of last year's Nobel peace prize, is that profits will top $20m this year. Grameen covers 16 million families that make up 80% of the country's poor. This figure will reach 100% by 2010.

"We have seen poverty in Bangladesh reduce by 10% in five years, double the previous rate. I believe that we will be one of the few countries to meet the UN's millennium development goals by halving poverty by 2015," he said.

He adds that the bank is also helping to empower women. Fertility rates have halved and the family size has shrunk, surprising "because Bangladesh is a Muslim country". Grameen bank's own surveys show 58% of borrowers have crossed the poverty line.

The only problem is Bangladesh's "political turmoil", which threatens to derail the good work. "It is the big worry we have," he says hours before the army takes to the streets as thousands of protesters paralyse the capital. Although Prof Yunus has been urged to enter politics and "save the nation", he demurs, saying it is not his "professional calling".

Islamic groups in the country have criticised him, Grameen bank and micro-credit for charging interest and making women work. "I tried to explain it is not all that bad. That the Prophet Muhammad's own wife was a businesswoman whom Muslim women could emulate. It is the fanatic fringe of the religious right which have problems with us, but they are a very small minority."

Although seen as a humanitarian visionary, Prof Yunus does not give money to beggars, which in Bangladesh appears shocking. "It does not solve the problem," he explains. "I think that rich countries have fallen into this trap with welfare systems where able-bodied humans are paid to sit around and do nothing. This is a system that produces zombies. By giving money to beggars you have the same response. It is the system, not your conscience, that needs reforming."

Instead, three years ago, Prof Yunus asked Grameen employees to recruit beggars as customers and turn them into a sales force. It offers small interest-free loans of about $12 that beggars can use to purchase "cookies or toys", which can be sold while begging. The loan can be paid back at any time.

"It is working. We have lent now to 84,000 beggars, four for every member of staff. More than 5,000 have quit begging. All we did was lend money."

Prof Yunus' two much-repeated tenets are "credit is a fundamental human right" and "poverty will one day be found only in a museum".

His other ventures all bear the hallmark of caring capitalism. Grameen is supplying candle-lit Bangladeshi villages with solar power and it brought the French football superstar Zinedine Zidane to promote a low-cost yoghurt venture with Danone.

GrameenPhone, Bangladesh's biggest mobile operator with more than 10 million subscribers, is 62% owned by Norwegian telecom group Telenor. The rest is owned by Grameen Telecom, a firm in the Grameen family of businesses.

"With yoghurt I want to tackle malnutrition in the country. The phone company is not yet a social business: it is profit-maximising, but I want to convert it to one some day. I just need to convince Telenor."

The managing director of Grameen bank has won many admirers: Hillary Clinton said that Prof Yunus had helped the Clintons to introduce micro-credit schemes to some of the poorest communities in Arkansas.

But fame has its pitfalls. On a recent trip to China Prof Yunus woke up to headlines screaming that he had criticised the ruling Communist party. "I thought, 'Oh my god what will happen to me'. I was terrified. But China is in real trouble. Some parts of the country are zooming ahead and others are stuck. Their [anti-poverty] institutions are not working. The central bank has invited me to start a Grameen bank. I'll be among the first foreign banks in China."